City, village skepticism of tax reform well founded

As House Republicans push to get a municipal income tax reform bill through the chamber this week, Ohio cities and villages are bracing for the worst.

It's worth noting that the complexities of the state's municipal income tax system makes it worthy of reform. It's also true that reform often requires taking short-term hits for long-term gain and Ohio needs measures that will make it more competitive for new investment and jobs.

A measure that streamlines income tax payments for those employees who live in one area, but work in another is a prudent move. It's also shrewd to standardize the filing of taxes for businesses that have multiple locations across the state.

But the revised bill that was approved last week is a a measure that likely will, in the words of the Legislative Service Commission, "create, overall, a net revenue loss to municipalities." To top all this off, House Republicans are in a big hurry to get this bill passed, which is an even bigger mistake.

And that's no small matter, as more than $4.3 billion in income tax revenues are collected by cities and villages - with the bulk of that money collected by cities. Those losses, says the LSC, may be in the millions.

One of the big sticking points is a move to allow businesses to carry forward net operating losses for five years in order to minimize the tax impact on future profits.

That move already is in place in many cities and villages across the state. What's not in place is the time period, and, five years simply is too much time. The so-called "carry forward rule" would have to be enacted in about 250 municipalities, according to the Ohio Municipal League, and would cost those sites a large amount of tax revenue at a time when each dollar is stretched to its limits, and then some.

Some of the cities and villages not currently carrying losses forward are Mansfield, Newark, Chillicothe, Lancaster, Marion, Fremont, Port Clinton and Bucyrus. Other places, such as Bellevue, Hebron and Coshocton currently carry losses forward, but are not at five years, which would hurt their revenues less significantly.

There are many areas of the state that already have the "carry forward" provision, but for the sake of those who aren't and, for the sake of fairness for all Ohioans, it's best to slow the forward momentum and make sure many smaller cities and villages aren't more significantly hit with revenue losses they can't afford.

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City, village skepticism of tax reform well founded

As House Republicans push to get a municipal income tax reform bill through the chamber this week, Ohio cities and villages are bracing for the worst.